(Note - this is largely imaginary - a few real world institutions are also included for realism. Refer to the Glossary at the end of this paper for “real concepts and institutions”).
AGRI-CREDIT
Agricultural Bank of Southland. Founded in 1966, the majority of the shares are held by domestic public sector institutions, notably SODEVBANK. Until 1993 minority equity stakes were held by foreign development banks.
Since 1969, AGRI-CREDIT has operated a Small Farm Lending Scheme, (SFLS) targeted at peasant farmers, under which it lends for seasonal production inputs and the purchase of machinery and building materials. Over 95 percent of small farm lending is for seasonal inputs, which are supplied to farmers exclusively by the ASD. The Small Farm Lending Scheme has been subsidized, in that AGRI-CREDIT obtained a grant from the MAFNR, which was related to the number of borrowers taking seasonal credit in the current season, and was supposed to compensate for the additional transactions costs incurred in dealing with small farmers as compared to commercial clients. However, AGRI-CREDIT was not covered by government against the risk of default.
AGRI-CREDIT SMALL FARM LENDING SCHEME: NUMBERS OF CURRENT BORROWERS AND OF BORROWERS MORE THAN ONE YEAR IN ARREARS, 1980 TO 2001
Source: AGRI-CREDIT
The graph above show that the numbers of participants in the SFLS rose steadily over the first half of the 1980s and, in the 1985 season, an estimated 12 percent of peasant households borrowed. Unfortunately, repayment performance was weak and action by AGRI-CREDIT to deny new loans to borrowers with more than two years in arrears has been behind the rapid decline in both the number of borrowers and the value of annual new lending. In 1990, the real value of new lending under the SFLS was down by a quarter on the 1980 level. This may have had serious implications for the development of peasant agriculture, although some observers point out that, even at its peak, the SFLS had very limited coverage, and that most small farmers are believed to finance production from savings, remittances from urban relatives and informal credit.
The SFLS accumulated large losses up to 1990, partially disguised by lax accounting policies under which very little of the loan arrears have been written off. The government sharply increased the real value of its subsidy (see Figure 15 in the data files distributed with this text) to the extent that, in 1990, the value of the annual subsidy was almost the same as loan disbursements. Losses continued into the mid-1990s. Following the tabling of the PFP in 1993, the government attempted to raise the bank’s flagging fortunes by holding an auction at which it hoped to sell off the shares in AGRI-CREDIT held by domestic public sector institutions. The rationale behind this plan was partly as a means to reduce government recurrent expenditures. However, before the auction could take place foreign development banks who owned minority equity stakes pulled out. The bank collapsed and had to be further propped up by government “loans”.
Since the failed privatization, AGRI-CREDIT has been managed as a government corporation, with management under very strong instructions to stem further losses. The main response of management has been a hike in interest rates in order to recoup some revenue, with lending only going to those with collateral and/or a record of repayment. Farmers with existing medium-term loans are finding it increasingly difficult to meet repayments due to the unforeseen higher cost of borrowing. The agricultural credit crisis persists to date and the number of borrowers has decreased by an additional 40 percent since 1995, with the poorer and middle-income groups being worst hit. Farmers in NA3 and NA4 have very little collateral, making it almost impossible to secure loans for the purchase of inputs, unless it is through linking with other contracts - for example, share-cropping or contract farming.
Various observers have noted that the crisis in smallholder lending has had major effects on the utilization of inputs in the smallholder subsector (especially fertilizer), which could be a factor behind the weak response of the subsector to liberalization. Agencies concerned with rural poverty have been pointing out that the reduction in the number of borrowers has been concentrated on poorer farmers. As a response, a number of donor-funded and NGO projects have been launched or have decided to expand their field of activity to provide credit for inputs or free inputs, under varied and uncoordinated modalities.
AMCOP
The Amalgamated Copper Company. One of the "big two" foreign mining companies nationalized in 1969, after which it became a division of SOPECO.
ASD
The Agricultural Supply Directorate is a department of the MAFNR responsible for the supply of inputs to peasant farmers. Permanent (i.e. year - round) staff of the ASD are civil servants. The ASD maintains a network of 435 local supply depots, 413 of which are in NAs 2, 3 & 4. The network expanded rapidly in the 1970s, through the investment in integrated rural development which took place under SODEVPLANs I & II. The ASD's sales consist mainly of seasonal inputs (fertilizer, chemicals and seeds), but also hand tools, ploughs, pump sets and, on occasion, tractors. The ASD is the exclusive source of supply for purchases financed by AGRI-CREDIT's Small Farm Lending Scheme, which, in 1990, accounted for about 40 percent of ASD turnover but has recently declined since the AGRI-CREDIT crisis.
The ASD does not have a legal monopoly and in the commercial farming zones of NAs 1 & 2, it faces significant competition from private suppliers. Furthermore, the ZOIGMAs are not required to deal exclusively with the ASD, and, in recent years, have set up input procurement organizations for their farmers which bypass the ASD. However, for peasant farmers located at a distance from commercial farming areas or ZOIGMAs, the ASD is often the only available source of supply along with NGOs and donor-funded projects established with the specific objective of poverty reduction. In some limited cases particularly in NA2 and in densely populated parts of NA3, these activities have been in support to recently established farmer’s groups. Thus for most non-irrigated peasant farmers the ASD is for all practical purposes a monopoly supplier. The ASD still benefits from operating subsidies from the government, but this is being increasingly criticized by some donors who would like to see it become an autonomous organization operating on a no-loss basis.
Although peasant farmers' organizations complain about the ASD, they are worried about the prospect of privatization, as it is believed that the ending of government subsidies could lead to a withdrawal of input marketing services from high transport cost and remote areas. It is critical that a solution to the problem of supplying inputs to small farmers be found, but the question remains as to what direction reform should take.
CBoS
The Central Bank of Southland.
CONSOLCOP
The Consolidated Copper Corporation. One of the "big two" foreign mining companies nationalized in 1969, after which it became a division of SOPECO.
DDC
Under the Decentralization Law approved in 1998, District Development Councils have been established which are elected every five years. The DDCs are responsible for promoting development activities in the district and are supported by a district administration headed by a District Executive Officer. Most sectoral ministries - in particular agriculture - are represented at district level. DDCs have been given the right to levy taxes and get grants from the government for funding projects. Decentralization in Southland has been very slow in getting into motion, and the main proportion of resources flowing into the districts for development activities are still coming from the central ministries and spent directly by their District Offices. DDC is however formally approving their programme of activity. It is now envisaged to enter into a second phase of decentralization where DDCs will be responsible for identifying, designing and approving all district level development activities. Budgets will be fully decentralized, but sectoral allocation will likely be pre-determined by central government.
FRUITEX
The Fruit and Vegetable Export Corporation of Southland. Formerly a parastatal company, under the MAFNR, with a monopoly over all exports of fruit and vegetables, FRUITEX was privatized in 1994 in the pre-Agricultural PFP round of privatizations. However, the drought which followed has meant that export volume has fallen dramatically as fruit and vegetable production was badly affected by the adverse climatic conditions. Competition has been slow to materialize and FRUITEX therefore still has an effective monopoly over fruit and vegetable export. Transport costs by air of fruits and vegetables have sky-rocketed after the privatization of the national airline company, the new private company having succeeded in keeping monopoly for fret transport. Airport cold storage facilities have degraded for lack of maintenance and are often not functioning. Furthermore, the premium on its brand which FRUITEX formerly enjoyed now appears to have eroded and the company is not performing well in the face of competition on world markets. Besides, it is expected that the implementation of WTO rules and regulations will contribute to erode considerably trade preference facilities Southland is enjoying in some countries, particularly in Europe. There is a general feeling that a lot more needs to be done by way of brand establishment and the promotion of value-added products if Southland’s fruit and vegetable sector is to be a success.
FCDB
The Fisheries Control & Development Board. This body, which comes under the MAFNR, is charged with the development of coastal and deep-water fisheries in order to promote improved nutrition, export earnings and employment.
The FCDB has played a relatively minor role in the development of coastal fishing. Over 1965 to 1980 it set up eight "fisheries co-operatives", to which it made loans for the development of boats, equipment and on-shore processing, storage and marketing facilities. The on-shore facilities have, in general, been badly managed by the cooperatives and presently even boats owned by co-operative members sell their catches mainly to private processors/marketers. The FCDB has been inactive in coastal fisheries development since 1980, due to a lack of development funds.
Although Southland has rich deep sea fishing grounds, it does not have a deep-sea fishing fleet. The FCDB has licensed foreign fleets, but the revenue has been relatively small and, under a 1973 Decree of the Revolutionary Council, 85 percent of the proceeds of licensing have to be transferred to the Southland Navy, to finance its fishery and coastal protection activity.
Over 1984-86 the FCDB, jointly with an external development agency, carried out a major design and appraisal on a Deep Sea Fisheries Development and Protection Programme. Key elements of the project were the development of two harbours, together with associated processing, for larger vessels. Southland was to acquire deep sea trawlers, and to train nationals in their operation. Foreign ships fishing in Southland waters were to be required to land a proportion of their catch in Southland ports. It was proposed that role of the armed forces in fisheries protection be reduced to that of last resort, with the FCDB acquiring its own inspection and enforcement fleet. Financing for the project was to be 60 percent external, with the balance being provided by enhanced license fees to foreign operators, stricter enforcement, and an ending of the transfers to the armed forces budget.
The Deep Sea Fisheries Development and Protection Programme has, so far, failed to go ahead. Difficulties appear to be: (i) the external development agency continues to insist on a substantial national financial contribution to the project; (ii) the Southland Navy, through its influence in the Peoples’ Development Movement succeeded to resist the proposal to deny it revenue from fisheries licensing, pointing out that, in the present period of financial stringency, this accounts for 40 percent of the share of the defence budget allocated to the Navy.
There is still significant potential for expansion in the fisheries sub sector. The growth rate, however, is slow due to factors mentioned above, the low priority given to aquaculture at the national level and poor infrastructure. Artisanal fishing activity has had the fastest growth rate over the last decade with canoes and small craft landing over 50 percent of domestic catch. Activity is labour intensive with the fishing itself being carried out by males and women playing an important role in processing and marketing. Efficiency in the artisanal sector has improved substantially with catch per canoe increasing by 30 percent over the period 1985-2000. Fish consumption itself has remained constant in coastal areas, with the exception of 1994-1995 where consumption increased substantially. This can be put down to reduced availability of staple agricultural foodstuffs due to drought. Fresh produce tends only to be available near production centres due to transport problems.
At present there is a curb on further increases in yield due to a lack of marketing channels for the product. However, should activity continue increasing at the same pace there is a danger of over-exploitation of fishing grounds with subsequent falling-off of yields.
FSB/FSA
The Food Supply Board of Southland (FSB) is the successor to an organization founded in the 1930s. Until the 1997 reform, the mandate of FSB was to ensure adequate food supplies and "affordable” consumer prices for staple foodstuffs. The FSB maintained stocks of grain and owned storage depots. Its supplies came from procurement from domestic farmers, and from imports of grain on concessional and commercial terms. In terms of the law, the FSB was under the jurisdiction of the MAFNR's parastatal division and controlled international trade in basic foodstuffs: food exporters were required to obtain a licence from the FSB, while importers were required to pay a variable levy to the FSB, equivalent to the difference between the import price and the intervention price at which the FSB bought from domestic producers. The FSBs producer price was pan-territorial, i.e., the same at all FSB buying depots.
The FSB received very large subsidies, amounting in mid 1990s to in excess of 4,000 million suds (Fig 15 in the data file distributed with this text). During the drought crisis of 1994-1995, the FSB performed well, distributing food aid and mobilizing grain supplies to reach populations in the harder-hit, predominantly agricultural, regions as well as in urban centres.
This notwithstanding, in 1997, the government transformed FSB into FSA, the Food Security Agency of Southland, as part of the overall economic reform programme resulting from its agreement with the IMF and the World Bank. The reform was designed to restrict the role of the organization to managing the strategic grain reserve and to foster an environment that would facilitate private sector development. The private sector was to take on functions of marketing previously performed by the FSB in a liberalized environment. FSB was to sell or rent out its network of stores to the private sector, keeping only those outlets located in remotest areas where the private sector was yet to be developed. FSA was to run a series of private sector development programmes for which funding was provided by donors, particularly the World Bank. The new agency was to run its now limited operations on commercial terms, buying and selling at local market price. Through this reform, and benefiting from two of relatively good agricultural years, the government was able to bring virtually to almost nothing its food subsidies in 1998 and 1999. However, because of severe domestic pressure to keep food prices low, there was only a limited private sector take over of FSB’s marketing functions - in part because of the difficulty it had to obtain the capital required to fund grain purchases - and in the preparation of the 2000 elections, FSA was again involved in extensive food purchasing and selling operations and the subsidy bill again went out of control in 2000 and 2001. Concerned about food imports and progressively declining per caput grain consumption (Figures 10 & 11), the government is now reluctant to reduce the FSA's subsidy, but is under very strong pressure to do so from the IMF, World Bank and the Ministry of Finance. Nevertheless, pressure is mounting for the GoS to cease subsidies and possibly to privatize the FSA, from both domestic quarters and international donors.
IFC
The International Finance Corporation, a member of the World Bank Group.
MAFNR
The Ministry of Agriculture, Food and Natural Resources.
NSFU
The National Small Farmers’ Union is a federation of small farmers groups and associations that have developed in recent years. The SFUS was formally created in 1999 and has close links with the Peasant Alliance. Membership is mainly concentrated in zones NA3 and NA4. Support to this Union is mainly from NGOs and some bilateral donors. SFUS has been very active in promoting micro-finance schemes, grain banks and in providing training to farmers’ groups in agricultural marketing, legal aspects and group management. SFUS has also been involved in advocacy activities to promote policies favourable to small and food insecure farmers.
PA
The Peasant Alliance. This became a formal political party in 1953, although it had its origins in earlier social movements. Initially the PA campaigned against settler agriculture and the partiality to settler agriculture of colonial government policy. The PA sought the restoration to small farmers of land which had been alienated at the establishment of settler farms, and was notably hostile to the WRVA, which it argued was entirely negative to peasant interests. The PA has had an ambiguous relationship with the indigenous land-owning elite. Up to 1960, relations were generally non-antagonistic, both groups seeing themselves as suffering discrimination from the colonial regime. However, from 1960, the PA adopted the position that post-Independence land reform would have to encompass large farms owned by indigenous Southlanders, and that sharecropping should be abolished - or at least regulated in favour of the tenant. Irreconcilable tensions caused the PA to leave the government in 1965, since when it has been in opposition. Following the 1968 Revolution, leaders of the PA - along with leaders of the SPL - accepted an invitation from the military to join the Revolutionary Council. However, PA leaders became increasingly disillusioned with government policy and when, in 1971, the Revolutionary Council created a mass civilian party, the PDM, most PA leaders refused to join it. A small group of PA activists did join the PDM, and played a role in its "Peasants Bureau". The PA opposed the PDM in the parliamentary elections of 1976, 1981 and 1986, but obtained only a small number of seats in the National Assembly. During these elections the PA had suffered from a ban imposed by the government on most if its well known leaders to stand for election.
Although the 1995 elections were won by the incumbent governing party, the PDM, the PA managed to win a substantial number of seats in rural areas, reflecting the dissatisfaction of the rural population with what they perceive to be the urban bias of PDM policy. PA seats tend to be concentrated in NAs 3 and 4, the populations of which feel that they have been overlooked somewhat by the PDM whose manifesto tended to concentrate on industry, urban areas and the less problematic Natural Areas 1 and 2.
In the 2000 elections, the PA won 19 percent of the national vote, and 27 percent of rural seats in the parliament. It negotiated with the PDM to form a government, but the PDM was not prepared to put in place policies which would be likely to end IMF/World Bank support. Presently the PA is a “critical supporter” of the government, allowing legislation to be passed as long as the government has discussed it with the PA, which must insist that its poorer rural constituents must not be disadvantaged.
PDM
The Peoples' Development Movement. Formed in 1971 on the instructions of the Revolutionary Council to be a mass party representing the interests of all the people of Southland. Although some senior figures within the PDM argued that the Southland should become a one-party state, to avoid the divisiveness and waste of resources associated with party-political competition, Southland's political system remained multi-party, if weighted in favour of the PDM. The PDM obtained a majority in the Parliamentary elections in 1976, 1981, 1986 and 1995. The election of 1995 was close-run with the PDM’s majority narrowing considerably.
The 2000 election saw a substantial reduction in the PDM’ support in rural areas, and the PDM ended up as the largest party in parliament (41 percent of the deputies), but without an overall majority. The PDF then negotiated with two opposition parties, the PP (which has been legalized in 1997) and the PA, to form a government. The SPL refused even to enter talks. In the event, the government found it impossible to reach an agreed economic and social programme with any opposition party. Potential coalition partners insisted on changes which would have made it impossible for the government to negotiate new support from the IMF and World Bank or to successfully go through the HIPC process. Thus since 2000 the PDM has remained the governing party, supplying all of the ministers, but without a majority in parliament. To get legislation through parliament, the government has had to discuss all policy measures with the PA and the PP. The PA has been very unhappy about the status of support to small farmers, and has certainly slowed down the liberalization and privatization agenda.
PEP
Poverty Elimination Programme, established in 1993 by the Government of Southland as a social safety net during the economic policy reform process. Activities falling within the PEP so far have included food-for-work and cash-for-work schemes and free school meals. To date the programme has largely focused on urban areas as a safety net against the upheaval of industrial reform. The PEP administration worked closely with the FSB during the drought, proving to be capable of extending its support to rural areas. The GoS envisages that the PEP will expand as the reform process continues, to encompass the agriculture and food sectors and will include measures aimed at the rural poor.
PP
The Patriotic Party was formed in 1946, with close links to the monarchy and other elements of the traditional land-owning elite. The PP won 55 percent of the vote in the 1961 elections, and thus formed the majority in the coalition government formed at Independence in 1962. The PP was suppressed after the 1969 Revolution and legalized in 1997, although it has yet to win more than 2 seats in the parliament.
SCCIA
The Southland Chamber of Commerce, Industry and Agriculture was established in 1997. It has a national office as well as representation in each region and in some of the districts where it participates as an active observer in the District Development Council meetings. It has mainly an advocacy role and is politically close to the PDM.
SCFA
The Southland Commercial Farmers’ Association was created in 1994. Its membership includes mainly medium and large commercial farms in zones NA1 and NA2. This association has had relatively strong links with the PDM. The Association has benefited from donor support and has organized numerous training programmes for farmers in improved technologies for the production and packaging of export commodities. The Association is also active in advocacy in favour adopting policies and measures favourable to commercial and export farmers.
SPL
The Southland Progressive League was formed in 1955 with a strong base in trade unions and among public sector workers. Although, in the years before Independence, the SPL worked with the PP and the PA in the nationalist coalition, the SPL was scornful of the PP economic policies, arguing for a much more active role for the state, for more aggressive measures to reduce foreign control in the economy, and for the introduction of a welfare state. The leaders of the military coup which initiated the 1968 Revolution were sympathetic to SPL positions, and some SPL leaders accepted ministerial positions in the military-led government of 1968 - 71. In 1971, the SPL formed the nucleus of the PDM, and, since 1971, many senior government figures have been individuals who began their public life as SPL activists. In the 2000 elections, the SPL won nearly 10 percent of the vote, standing as the “antiglobalization” party, and seeking support among younger urban voters. The SPL has a highly adversarial relationship with the PDM, and it certainly limited the PDM’s freedom of movement in attempting to liberalize the economy.
SODEVBANK
The Southland Development Bank. Reporting to the Treasury (otherwise known as the Ministry of Finance), the bank, founded in 1962, is capitalized by equity and loans subscribed by the government, and by the development banks affiliated to various external aid agencies. SODEVBANK makes equity and loan investments to national companies which are expanding productive capacity. The bank has an agricultural department, which is supposed to account for a minimum of a quarter of total investments. Heavy government influence means that over the last decade most investments have been directed towards poorly performing parastatals and, as such, returns on investments have been virtually non-existent. This is a great cause for concern to the government and it has been suggested in some government quarters that there be a portfolio sell-off by receivers to other investment houses within the country. Some lobbies, however, have argued that this could further aggravate the situation as relevant parties would not be subject to rules on lending. The question has also been raised concerning the type of investment institution which will be putting money into rural areas and the long term implications for the growth and development of the agri-food sector.
SODEVPLAN
Southland Development Plan. SODEVPLANs I, II & III are described below in Document 8 "Chronological Summary of Economic Policy and Planning".
SOPECO
The Southland Peoples' Copper Company - the holding company which took over the assets of AMCOP and CONSOLCOP, nationalized following the 1969 revolution. SOPECO is a major employer and has set up considerable social infrastructure, most notably hospitals and schools near its major mines. Very little prospecting and new investment had taken place since the 1970s making the case for privatization very strong. Indeed, the government was receiving less revenue from the nationalized company than when it was in private hands. Environmental standards have slipped with water quality a particular worry due to substantial effluent discharge into local water courses and seepage into groundwater. However, efficiency below ground is good. SOPECO has now partly been privatized under industrial sector adjustment. Donors have suggested that the technically optimal solution would be to sell mines off in groups encompassing both the more profitable and the less profitable plants. The GoS, however, is finding it more profitable to sell off the mines in smaller units, leaving a large proportion in the hands of the state. However, this 50-60 percent of holdings which would continue to be state-owned is largely unprofitable and would not attract investment. This has led to concerns about the ability to continue supporting and financing social infrastructure which has traditionally been the responsibility of the state-owned SOPECO and could constitute a grave problem for the country. Furthermore, the new private owners are not happy with the lack of continuity in electricity supply which is due in part to the advent of drought in 1994 but can mainly be attributed to wider problems in the water sector.
SOSUCO
The Southland Sugar Corporation. A corporation created in 1966 to develop the production of sugar cane, its milling and refining. Privatized in 1997. Since then, production of sugar has decreased, as the buyer of the corporation (a foreign firm) decided to close down a couple of old sugar factories located in lower potential areas.
TEXTCO
The Textile Company of Southland. Until 1993 TEXTCO was a public company which owned over 50 percent of domestic cotton spinning, ginning and weaving capacity. It also operated a marketing system for the procurement of cotton from peasant farmers. In 1993 a bill went through parliament stating that TEXTCO was to be split into its separate operations and sold off, with the idea that the different companies should now compete on an equal footing with other firms in the industry.
As it stands now, TEXTCO has been completely privatized, and the cotton sector is performing relatively satisfactorily with production increase observed regularly since 1995. The strategy of the new owners (a number of small national companies linked to some multinationals who purchase the produce) has been to facilitate the development of farmers’ groups to whom extension was provided along with inputs through contract farming arrangements.
TEXTCO has also launched a programme of field trials of multiple resistance cotton on farmers fields since 2002 and envisaging similar trials for multiple resistance maize that is cultivated in rotation with cotton. TEXTCO expects that if the trials are successful, production of cotton could be boosted by more than 25 percent with a considerable reduction of the cost of production and improved food security for the small farmers. Environmental and consumer groups have been complaining with the government arguing about likely negative the environmental and economic impact of using GMOs in the country and they have asked the government to adopt an official stance on the GMO issue.
TOBACSO
The Tobacco Corporation of Southland was a parastatal company under the MAFNR, created in 1957 with a mandate to develop tobacco production in selected areas of peasant farming. TOBACSO used to provide farmers with extension advice, inputs on credit and marketing services. It was privatized in 1996 and bought by a multinational tobacco company. Since then, the aggregate production of tobacco has dropped significantly putting at risk activities of the tobacco sector. This drop in production resulted from a strong decrease of production of large farms, only partly compensated by the increase among small farmers which is mostly due to the development of contract farming and promotion of two dynamic cooperatives.
WRVA
The Wadu River Valley Authority. A parastatal created in 1938 to develop the hydroelectric and irrigated agriculture potential of the River Wadu watershed, which drains south from the plateau region through the dry southern littoral region. The WRVA has undertaken a series of major capital-intensive investments in dams, power plants and downstream irrigation schemes. Up to the time of Independence, finance for WRVA investments was mainly obtained through the sales of bonds on the local and international market. The dividends on these bonds were paid with the cash flow generated from the sale of electricity to the copper industry and, to a much lesser extent, the sale of water to the zonal irrigation management units (ZOIGMAs). From 1975, WRVA began to experience difficulty in obtaining CBoS clearance for remittance of dividends to external holders of its bonds, and thus found it impossible to raise further finance through sales of bonds in international markets. From the end of the 1970s, WRVA had increasing difficulty in obtaining its requirements for foreign exchange for current operations, and, consequently, the quantity and quality of its supply of power and water deteriorated, with adverse effects on agro-processing industry and irrigated agriculture. It also began to realize large financial losses on energy and water supply operations.
Since 1986 the WRVA has become increasingly de-linked from the world economy as access to external sources of finance - mainly the sale of bonds and loans from commercial banks - has been cut off. Furthermore, the loss of discipline associated with such forms of finance means that the WRVA is no longer acting in the interests of its bond-holders, managers are no longer concerned with performance but rather their ability to wheedle more loans out of the government. Key customers, namely SOPECO and the ZOIGMAs have been unable to pay full charges and there is now a big debt chain between all players. Partial privatization of SOPECO has meant that the company is now obliged to pay a realistic tariff on electricity usage which ought to go at least part of the way towards lifting the consistently flagging fortunes of the WRVA. However, the new owners have expressed anger at this in light of the lack of continuity in power-supply. There has been little progress in improving cost-recovery of water and pressure for increased private capital investment is escalating. However, in order to attract external funds, tariffs needed to be higher which was an extremely unpopular measure with current users. A particular worry for the government has been the potential loss of political support from this quarter. Nevertheless, the government has introduced a scheme whereby low and middle-income users receive electricity on meters operating from cards which are charged with a certain number of units of electricity and purchased from so-called electricity shops. Simultaneously, tariffs for household use were increased, triggering mass protests in low-income areas, as had been feared. In response, the government again reduced tariffs, against the advice of the World Bank, which is pushing for the reinstatement of higher electricity charges.
ZOIGMA(s)
Zonal Irrigation Management Units. These are irrigation command areas created by investments downstream from the WRVA, which began in 1939. The WRVA perspective plan - first published in 1937 but updated a number of times since - calls for the creation of nine ZOIGMAs by the year 2005. However, by 2000, five ZOIGMAs had been created, and further investment had been frozen, due to the shortage of government funds and the unwillingness of international development agencies to commit funds in a turbulent economic climate. The first investment, ZOIGMA-DUDU was planned entirely as a settlement scheme for commercial farmers. Since Independence, a series of investments over 1963 to 1977 have created small-scale - peasant sized - units as well as further capacity for large scale production units. Of particular note is ZOIGMA-MISCO, created in 1966 in association with SOSUCO, on which sugar cane was grown on nucleus estates managed by SOSUCO and also purchased from small scale "outgrower" units, before the company was privatized.
At the grower level, farmers have become increasingly dissatisfied with the price they are receiving for sugar cane. Indeed, many farmers have been reducing the area under sugarcane benefiting from virtually free water and utilizing the water on their fruit and vegetable crop.
